Pearl Oriental arm fights exchange rejection
Pearl Oriental Holdings, headed by Wong Kwan, yesterday launched a legal challenge to the recent decision by the stock exchange ruling council to reject a membership application by its Pearl Securities arm.
Pearl Securities, represented by Gerard McCoy, SC, applied to the court for leave to seek a judicial review, declaring the exchange's articles of association and membership rules 'unlawful, void and of no effect' for being 'non-transparent, unfair and outdated'.
The company seeks to quash the May 5 decision rejecting its membership application, and demands the exchange council give its application a new hearing.
It said the rejection had led to losses amounting to $7.3 million.
Pearl Securities' membership application was the first to be rejected since the exchange was set up in 1986.
The decision was reportedly related to an ongoing Securities and Futures Commission investigation into trading in Pearl Oriental shares.
Pearl Securities claims the council's decision, reached by secret ballot, was unfair. At the council meeting in question, 27 members of the 31-member council attended, with four members voting against, 22 in favour, while one abstained.
According to exchange rules, it only requires four negative votes to reject a membership application.
Pearl Securities said the system was unfair as it was rejected even though it won 85 per cent of the vote.
It said the decision was inconsistent with those of the exchange membership committee and the SFC which had both approved its application.
Pearl Securities also said the rules did not require the council to give any reasons for the rejection nor did they provide any appeal channel.
Pearl Securities' application seeks the court to declare exchange rules 304(5) and 304(7), which relate to membership application decisions, and certain exchange articles of association, unlawful, void and of no effect.
The application said unlike listing candidates, membership applicants did not have the right to attend hearings, appeal or be given reasons for rejections. That showed the membership rules were 'outdated and unlawful'.
It said the voting system for new members was consonant with a 'private club membership determination' but not for a public body.
It said: 'The decision-making rules of the stock exchange promote the antipathy of fairness and transparency and cannot be in the interests of Hong Kong as a modern, major international financial centre.'